A Fantastic Hedger Against Turkish Inflation And The Lira Is Cryptocurrency

Despite the situation in the Ukraine, 2022 will unquestionably go down in history as the year of inflation for citizens in Turkey and many other countries. After decades of inflation below 5%, prices have risen by about 9% in both the United States and the European Union, with supply shocks to the energy and food industries accounting for the majority of the increase (not to mention quantitative easing).

9% inflation is still not as bad as the inflation that is wrecking havoc on the Turkish economy, which has long had inflation rates of 2% or less. The official estimate of Turkey’s inflation for the past year is 80%, while unofficial data indicates that real inflation may have reached 140% as early as April.

Turkish residents have suffered greatly as a result of such astronomical figures, but many have found a fairly inventive solution to lessen the affects of inflation: cryptocurrency. Despite having one of the highest rates of cryptocurrency ownership internationally and a reputation for authoritarianism, Turkey demonstrates that bitcoin is utilized for more than just high-risk speculation.

The official consumer price index for Turkey increased by 80.2% in August compared to the previous month, which was already exceedingly high. This is the highest rate ever recorded during President Recep Tayyip Erdoan’s nearly 20 years in office, and it also is the first time since 1998 that official inflation has exceeded 80%.

Lax monetary policy is typically attributed to Turkey’s uncontrollable inflation since Erdoan refused to raise interest rates to a level that may potentially constrain price increases. Despite this, the government believes that by year’s end, inflation will begin to drop.
Nureddin Nebati, the country’s finance minister, forecasted on Twitter that inflation would decrease significantly more in the upcoming months. We’ll drive high inflation out of these nations, and it won’t return.
Regardless of what lies ahead, everyday Turks are currently experiencing the effects of inflation that has been taking place for a while. This is evident from its data on cryptocurrency ownership, which shows that in 2019, 20% of the population owned or had held cryptocurrencies, and that number rose to 25% in 2021.

Data on bitcoin ownership around the world is fascinating since it reveals that nations facing pressures comparable to Turkey often have the highest levels of such ownership. In other words, people use bitcoin and other cryptocurrencies to maintain (or grow) the small money they already have due to inflation.

Turkish cryptocurrency exchanges are among the busiest in the world as a result, despite recent efforts by the government to restrict them in various ways (so far unsuccessfully).

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Data from Chainalysis and Kaiko in December 2021 revealed that daily cryptocurrency transactions within the nation’s boundaries averaged close to one million. One of the most obvious signs of how active the Turkish cryptocurrency market is may have been this.
What Will Happen to Turkey’s Cryptocurrency?

People on the ground confirm that they purchased bitcoin and other cryptocurrencies in response to the issues the Turkish lira was having.

Izzet Emre Ari, a computer engineer in his twenties who spoke with Reuters in 2021, claimed that “if my savings are in lira, they are losing value.”
Turkish cryptocurrency trading has become so popular that some local observers have described a “cryptolization” process as the area’s residents move to cryptocurrencies as a means of asset preservation.

Turan Sert, a consultant to the Paribu exchange in Turkey, told Al Jazeera in January that “in the past it was dollarization, meaning people maintained their assets in dollars to prevent volatility in their currency.” The newest craze is now known as cryptolization.

Even more recently, Turkish industry insiders assert that Turkish excitement for cryptocurrencies hasn’t been greatly impacted by the bear market of 2022. This is because Bitcoin, which has fallen by 71% since reaching an all-time high of USD 69,000 in November, has fallen even more dramatically than the Turkish lira.

There is a significant amount of demand for and trading volume in Turkey’s cryptocurrency market because people there seek to safeguard their money from growing inflation and high interest rates. In a recent interview with author and consultant Vedat Guven for the German state-run news channel DW, Guven claimed that 10–12 million Turks, including family members, are interested in Bitcoin, with 5.5–6 million having accounts.

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